02-25225. Self-Regulatory Organizations; the American Stock Exchange LLC; Order Granting Approval to a Proposed Rule Change To Make Permanent a Pilot Program Under Amex Rule 126(g), Commentary .01, Relating to Size Precedence

September 27, 2002.

On March 22, 2002, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) ^[1] and Rule 19b-4 thereunder.^[2] The proposed rule change would make permanent a pilot program under Amex Rule 126(g), Commentary .01, regarding a 5,000 share minimum block cross size to establish size precedence. The pilot program was established in SR-Amex-2001-01, and has been in operation since March 28, 2001.^[3] Notice of the proposed rule change was published in the Federal Register on April 3, 2002).^[4] The Commission received no comments on the proposal.

The Commission has reviewed carefully the Amex's proposed rule change, and finds, for the reasons set forth below, that the proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, with the requirements of section 6(b)(5) ^[5] of the Act. Section 6(b)(5) requires the rules of a registered national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange has represented that the reduction in the size precedence for clean crosses does not impair the application of Amex Rule 152, which provides price improvement opportunities for all or a portion of one side of a proposed cross.^[6] Moreover, the Commission finds that the size precedence reduction for clean crosses from 25,000 to 5,000 shares reflects an appropriate adjustment to a decimalized environment in which the minimum price variation for equity quotes has been reduced from the fractional equivalent of slightly over six cents to one cent. For these reasons, the Commission finds that the proposed rule change is consistent with the provisions of the Act, in general, and with section 6(b)(5).^[7]

It is therefore ordered, pursuant to section 19(b)(2) of the Act,^[8] that the proposed rule change (SR-Amex-2002-23) be, and hereby is, approved.^[9]

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[10]

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  See Securities Exchange Act Release No. 44122 (March 28, 2001), 66 FR 18125 (April 5, 2001).

4.  Securities Exchange Act Release No. 45660 (March 27, 2002), 67 FR 15841.

5.  15 U.S.C. 78f(b)(5).

6.  See September 17, 2002 letter from Michael Cavalier, Associate General Counsel, Amex, to Nancy Sanow, Assistant Director, Division of Market Regulation, Commission.

7.  15 U.S.C. 78f(b)(5).

8.  15 U.S.C. 78s(b)(2).

9.  In approving the proposal, the Commission has considered the rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

10.  17 CFR 200.30-3(a)(12).